Budget squabble unsettling business
2:35

A new survey shows job seekers may suffer if squabbles over the federal budget continue.

Sky News

04 Aug 2014

News

No vision: Support for Treasurer Joe Hockey’s budget will not fix unemployment says former Liberal leader. Source: News Corp Australia

AUSTRALIA now has an unemployment rate higher than the US. Is it time we accepted Joe Hockey’s unpopular budget measures? Not according to one former Liberal leader.

John Hewson, who led the Liberal party between 1990 and 1994, said Australia’s economy needed reform but told news.com.au “there’s none of that in (Mr Hockey’s) budget”.

The Treasurer is using the soaring jobless rate to justify the need for reforms contained in the budget, including a new fund to spur investment in construction projects.

“Doing nothing about the budget position is not an option, the status quo is not an option. ‘She’ll be right’ is not a policy,” he told The Australian.

“And it’s as much a call to the independents in the Senate as it is to the Labor Party and the Greens. If you care about job creation and employment, then back the budget, and back the budget now.”

But Mr Hewson, who is an economist who has worked for the Australian Treasury, the Reserve Bank and the International Monetary Fund, does not believe backing the budget will improve unemployment.

“It’s not good economic policy, it’s not a good budget strategy and it will probably prove not to be a good political strategy,” he told news.com.au.

Not impressed. Former Liberal leader John Hewson believes the government does not have a good budget strategy. Picture: Eugene HylandSource: News Corp Australia

Mr Hewson, who tried to push through GST reform but lost the 1993 election, said the budget had been an opportunity for the government to set out Australia’s transition away from a resource-based economy, reliant on mining profits, but it had failed to put forward a vision.

“To what? I couldn’t see anything (to indicate) what we are moving to.”

Instead, Mr Hewson said there were a lot of mixed messages that just confused consumers and businesses at a time when confidence was fragile.

“It’s been a lot of political pain for little gain,” he said.

Mr Hewson said that the budget had been “visibly inequitable” and no overall strategy was put forward that helped people to understand things such as the doctor co-payment and changes to university fees.

He also believes that the Abbott Government underestimated how flat the economy was, and that it had now used up so much of its political capital that it would struggle to get voters to trust it to deliver tough reforms in the future.

Data released on Thursday showed that Australia’s unemployment rate spiked to a 12-year high of 6.4 per cent in July, and the figures seem to have caught the government unawares.

It exceeds the 6.25 per cent rate Mr Hockey pencilled in the budget for the 2014-15 financial year, a level he said he inherited from the previous Labor government.

Mr Hockey said the results were disappointing, but the government had a plan to lift employment through new infrastructure projects, mature-age wage subsidies and tighter “learn or earn” eligibility for the dole.

Prime Minister Tony Abbott told the Australian Industry Group lunch today that there was a lot of hard work being done behind the scenes.

Mr Abbott said Australia now had free trade agreements (FTAs) with seven of its top 10 trading partners, and he hoped to reach a new agreement with China later this year. He said lowering tax, cutting regulation, concluding FTAs and investing in Australian skills were all part of the desire to make it easier to grow businesses.

“We are opening the door — so you can walk through it,” Mr Abbott told attendees of the business conference. “We aren’t providing you with corporate welfare. But we will give you a fair go so you feel more confident to have a go.”

The surprise jump in the jobless rate, which was up from the decade-high of 6.0 per cent in June, saw 300 positions lost from the economy.

Economists said the figures, which were well above consensus forecasts of 6.1 per cent, were worse than expected. The latest data also meant Australia’s jobless rate was above the United States’ for the first time since 2007.

The Australian Bureau of Statistics has switched to a new survey method but it does not believe this had a significant bearing on the outcome.

ANZ senior economist Justin Fabo said the headline figure could be overstating the weakness of the labour market, pointing to other employment indicators that have suggested that companies’ hiring intentions were improving.

“Most other labour market indicators are improving, at least slowly, so the jump in the unemployment rate does look odd in that regard,” Mr Fabo said.

“We’ll need the August report to confirm that view.”

A man searches for work in Sydney last month. Picture: AFP Photo/William WestSource: AFP

However, Australia’s central bank cut its growth forecasts today as it reinforced a “period of stability” in interest rates and highlighted the challenges the economy faces as it moves away from mining-led expansion.

The Reserve Bank of Australia lowered its GDP forecasts for 2014 and 2015 by 25 percentage points, and said the “key uncertainties” facing the economy included when and how large the fall-off in resources investment would be.

“The key uncertainties for the domestic economy continue to be centred on the timing and extent of the decline in mining investment and how this is balanced by the expansion of resource exports and the recovery in non-mining activity,” the RBA said.

“Mining investment could decline more sharply than anticipated. On the other hand, it is possible that consumption and non-mining business investment could, in time, be stronger than expected.”

In its quarterly Statement on Monetary Policy, the central bank projected economic growth to be about 2.5 per cent in the year to December 2014, down from 2.75 per cent forecast in May.

How long will the boom last? The Reserve Bank cuts its growth figures. AFP/Amy COOPESSource: AFP

The Australian dollar also lost more than half a cent after the unemployment data was released, falling from 93.55 US cents to 92.96 US cents.

Employment Minister Eric Abetz pointed the finger at the opposition for holding up budget measures in the Senate.

“Literally hundreds of thousands of our fellow Australians ... have been denied a job because of the recalcitrance of (Opposition Leader Bill) Shorten and the Greens,” he told reporters in Wollongong, NSW.

Full-time positions in Australia increased by 14,500 but 14,800 part-time roles were shed. Analysts had expected 12,000 jobs to be added in the month.

The participation rate, which measures the proportion of adults in work or looking for it, lifted by 0.1 percentage points to 64.8 per cent.

Labor’s employment spokesman, Brendan O’Connor, noted Australia now had a higher unemployment rate than the US for the first time since 2007.

“There’s no doubt that (the government’s) unfair budget has hurt business and consumer confidence,” Mr O’Connor said.

Prime Minister Tony Abbott says there is a lot of work going on behind the scenes.Source: News Corp Australia

ACTU president Ged Kearney agreed, saying the budget was not just a political failure but an economic failure. Acting Greens leader Adam Bandt described it as a “wrecking ball”.

The figures also somewhat contradict comments by Reserve Bank governor Glenn Stevens this week that the outlook for the labour market had improved, albeit conceding it would probably be some time before unemployment declined consistently.

The RBA will release its quarterly monetary policy statement on Friday.

David Lane, a director at business consultants Pitcher Partners, does not believe the jobs data will affect interest rates.

“The latest (unemployment) rise is likely to quieten anyone who has been suggesting the RBA may raise interest rates to curb inflation,” Mr Lane told AAP.

Commonwealth Securities economist Savanth Sebastian said: “There is no question that the economy went through a lull period following the federal budget, but it has since lifted”.

Australian Chamber of Commerce and Industry chief executive Kate Carnell urged opposition parties and independents to work constructively with the government.

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